RioCan Real Estate Investment Trust Succeeds in Continuing to Fill Former Target Canada Locations

01/24/2017

TORONTO, ONTARIO--(Marketwired - Jan. 24, 2017) - RioCan Real Estate Investment Trust ("RioCan") (TSX:REI.UN) is pleased to provide an update on current redevelopment and leasing activities at the properties once leased to Target Canada Co. ("Target").

Since Target's departure in 2015, RioCan's leasing team has been diligently working to drive revenue, and in many cases reinvent the centres formerly leased to Target. To date, RioCan entered into agreements or in advanced discussions on 47 leases that, when completed, will replace approximately 122% of the revenue lost from the major retailer's exit, not including the enhanced common area maintenance and realty tax recoveries.

Approximately one third of the replacement rental revenue will be established in the first quarter of 2017. The backfilled base rental revenue will continue to increase over three quarters, particularly in the second half of 2017, with the majority of this rental revenue in place by the end of the year. With the redevelopment work completed, these properties will then move out of the Trust's development portfolio and back into the income producing portfolio. The timelines for the resumption of rent in the backfilled locations is generally in line with our initial assessment to re-demise, redevelop, and in some cases receive municipal approvals as most of the affected properties were multi-tenant solutions. As a result of the redevelopment work, a portion of the space was either demolished or converted into landlord uses, such as common areas and loading docks. In addition, there is approximately 97,000 square feet currently being marketed that will provide further revenue when leased.

"I am proud of my team's efforts to complete the backfill of spaces and replace more than the rental revenue that was lost from Target," said Edward Sonshine, Chief Executive Officer of RioCan. "We will increase the cash flow in our properties through higher rents on the replacement leases. Our rental revenue stream will be more diverse and we have improved the revenue growth profile with rents that in some cases have embedded growth and provide for greater recoveries. Above all, we are confident that our centres will now have a greater appeal in their communities which, in turn, will strengthen the rental growth profile."

Target's departure provided RioCan with the opportunity to improve its shopping centres and diversify the rental revenue in these properties with strong national tenants such as, Costco, Lowes, Canadian Tire, TJX Brands (Winners, Marshalls, HomeSense), PetSmart, SportChek, DSW, JYSK, Staples and Michaels. These stores will generate greater foot traffic and provide better support for future rent growth. In addition, the Trust will benefit from higher recoveries as the new leases are more market based, providing for a full pro-rata share of operating cost recoveries, utilities, and realty taxes, which were capped under many of the former Target leases.

The expected cost to complete the redevelopment work related to the 47 leases is currently estimated to be approximately $137 million at RioCan's interest ($162 million at 100%). A substantial portion of the capital required for the redevelopment work was provided through the net settlement proceeds of $88 million at RioCan's interest ($132 million at 100%) with Target Corporation, Target's parent company.

The net result is stronger shopping centres with better appeal, greater cash flow, enhanced diversification, and a stronger rent growth profile than in the past.

"RioCan succeeds when its tenants and investors do," said Sonshine. "The company's entrepreneurial spirit has allowed us to view the closure of Target locations across Canada as an opportunity to cultivate new business and diversify our rental revenue stream and ultimately generate embedded growth leading to greater recoveries."

Property Level Highlights:

Stockyards (RioCan ownership - 50%)

At RioCan's Stockyards property in Toronto, Ontario, RioCan has entered into a lease agreement with Nations Fresh Foods to occupy the entire 153,456 sf. (76,728 sf. at RioCan's interest) that was previously occupied by Target. Nations Fresh Foods will take possession of the space in February, and is expected to commence operations in Q3 2017. Nations Fresh Foods is part of an Ontario based full service grocery chain focused on providing a multi-ethnic fresh food shopping experience through its Oceans Fresh Food Market and Nations Fresh Foods banners.

Lawrence Square (RioCan ownership - 100%)

At Lawrence Square in Toronto, Ontario, RioCan has successfully backfilled the majority of the 89,432 sf. that was leased to Target. The space has been reconfigured to accommodate four large format tenants ranging in size from 11,000 sf to 28,000 sf. RioCan has successfully leased 62,000 sf to HomeSense (23,000 sf.), Marshalls (28,000 sf.), and PetSmart (11,000 sf.). HomeSense and Marshalls commenced operations in April 2016 and PetSmart commenced operations in October 2016.

Negotiations are underway with a national tenant for the remaining unit of approximately 15,000 sf.

RioCan Scarborough Centre (RioCan ownership - 100%)

At RioCan Scarborough Centre in Toronto, Ontario, Target previously occupied approximately 116,241 sf. RioCan has entered into a lease agreement with Costco Wholesale Business Centre to occupy the entire space. This store will be the first new format Costco Wholesale Business Centre store in Canada and is expected to commence operations in March 2017.

Burlington Mall (RioCan ownership - 50%)

At Burlington Mall in Burlington, Ontario, the former Target box will be reconfigured to accommodate three large format tenants, and the remaining space of approximately 28,000 sf. will be used to accommodate small shop space. RioCan currently has completed leases with Denninger's Fresh Foods of the World, a specialty food retailer (23,000 sf.), Indigo (22,500 sf.) and Winners (22,000 sf.) and negotiations are substantially complete with four national restaurant tenants for approximately 17,000 sf. of the remaining small format premises.

The Trust is expected to receive site plan approvals and commence construction on the redevelopment in early-2017 and tenants are expected to take possession of their spaces in late-2017 and open in early-2018.

Millcroft Shopping Centre (RioCan ownership - 50%)

At Millcroft Shopping Centre, in Burlington, Ontario, RioCan has successfully completed the leasing for the former Target premises by completing leases with Movati Fitness (70,000 sf.) and Value Village (30,000 sf.).

RioCan received site plan approvals and commenced construction in the third quarter of 2016. The former Target premises have been partially demolished to accommodate a new freestanding 70,000 sf. Movati Fitness. Movati Fitness is expected to open in Q4 2017. Value Village is expected to take possession of their premises in Q2 2017 and open in Q3 2017.

RioCan Durham Centre (RioCan ownership - 100%)

At RioCan's Durham Centre in the Greater Toronto Area market of Ajax, Ontario, the former Target box (121,280 sf) will be reconfigured to accommodate three new large format tenants ranging in size from 20,000 sf. to 23,000 sf. and one additional small shop space of approximately 6,000 sf. RioCan has successfully completed the leasing for the former Target premises by completing leases with Michaels (23,000 sf.), PetSmart (20,000 sf.), DSW (20,000 sf.) and Structube (6,000 sf.).

Construction started in Q4 2016. Tenants are expected to begin taking possession in Q2 2017 and open between Q3 2017 and Q1 2018.

Shoppers World Brampton (RioCan ownership - 100%)

At Shoppers World Brampton, in Brampton, Ontario, the former Target box (121,490 sf) will be reconfigured to accommodate four large format tenants ranging in size from 17,000 sf to 38,000 sf. RioCan has successfully completed the leasing for the former Target premises by completing leases with GoodLife Fitness (38,000 sf.), JYSK (31,000 sf.), Giant Tiger (25,000 sf.) and Staples (17,000 sf.).

The Trust is expected to receive site plan approvals and commence construction on the redevelopment in Q1 2017. Tenants are expected to take possession in Q3 2017 and open by the end of the year.

Trinity Common Brampton (RioCan ownership - 100%)

At Trinity Common Brampton, in Brampton, Ontario, RioCan has successfully completed the leasing for the former Target premises by completing leases with Winners (25,000 sf.), Michaels (23,000 sf.) and DSW (20,000 sf.).

RioCan received site plan approvals and commenced construction in Q4 2016. Winners and Michaels are expected to take possession in 2 2017 and open by the end of 2017. DSW is expected to take possession in Q4 2017 and open in Q1 2018.

South Hamilton Square (RioCan ownership - 100%)

At RioCan's South Hamilton Square, in Hamilton, Ontario, the former Target unit has been reconfigured to accommodate three large format tenants ranging in size from 15,000 sf to approximately 35,000 sf. RioCan has successfully completed the leasing for the former Target premises by completing leases with Flying Squirrel (35,000 sf.), JYSK (32,000 sf.) and Fabricland (16,000 sf.). Flying Squirrel commenced operations in October 2016. Fabricland commenced operations in November 2016. Construction is underway on the JYSK unit and the tenant is expected to commence operations in Q2 2017.

Orillia Square Mall (RioCan ownership - 100%)

At Orillia Square Mall in Orillia, Ontario, Target previously occupied approximately 91,440 sf. RioCan has a conditional lease agreement with national large format retailer to occupy the entire 91,440 sf. that was formerly occupied by Target subject to receiving approval for an expansion of 12,000 sf. into a portion of the existing mall. If approved the tenant is expected to take possession in Q1 2018 and commence operations in mid-2018.

Five Points Shopping Centre (RioCan ownership - 100%)

At RioCan's Five Points Shopping Centre in Oshawa, Ontario, the former Target unit and a portion of the lands are currently under contract to be sold to an owner/operator (conditional on rezoning approval), where it will be redeveloped into a self-storage facility. The remaining portion of the mall will be reformatted into an open air centre that will better complement the adjacent centre also owned by RioCan.

Flamborough Power Centre (RioCan ownership - 100%)

At RioCan's Flamborough Power Centre in Flamborough, Ontario, the former Target will be reconfigured to accommodate several large format tenants. RioCan is currently in discussions with a number of national tenants at the site.

Stratford Centre (RioCan ownership - 100%)

At RioCan's Stratford Centre, in Stratford, Ontario, the former Target unit has been reconfigured to accommodate three large format tenants ranging in size from 16,000 sf to approximately 25,000 sf and one additional small shop space of approximately 4,000 sf. RioCan has leased 25,000 sf to Value Village, 17,500 sf to Michaels and 15,600 sf to World Gym. World Gym took possession in Q4 2016 and is expected to open in Q2 2017. Construction is underway on the Value Village and Michaels. Value Village is expected commence operations in Q2 2017 and Michaels is expected to commence operations in Q3 2017.

Gates of Fergus (RioCan ownership - 100%)

At RioCan's Gates of Fergus Shopping Centre in Fergus, Ontario, the former Target unit has been reconfigured to accommodate four large format tenants ranging from approximately 9,000 sf to 24,000 sf. RioCan has leased 12,700 sf to Dollarama, 20,000 sf to Giant Tiger and 8,500 sf to Mark's Work Wearhouse. Dollarama commenced operations in May 2016. Giant Tiger commenced operations in July 2016. Construction for Mark's Work Wearhouse is expected to begin in Q1 2017 and the tenant is expected to commence operations in Q3 2017.

County Fair Mall

The County Fair Mall in Smiths Falls, Ontario was sold during the fourth quarter of 2016.

Mill Woods Town Centre (RioCan ownership - 100%)

At RioCan's Mill Woods Town Centre in Edmonton, Alberta, the former Target will be reconfigured to accommodate several large format tenants. RioCan is currently in discussions with a number of national tenants at the site.

Mega Centre Notre Dame (RioCan ownership - 100%)

At Mega Centre Notre Dame, in Montreal, Quebec, the former Target premises are being reconfigured to accommodate three new large format tenants. RioCan has successfully completed the leasing for the former Target premises by completing leases with Gold's Gym (42,000 sf.), JYSK (30,000 sf.) and Staples (20,000 sf.).

RioCan received site plan approvals and commenced construction in the fourth quarter of 2016. JYSK and Staples are expected to take possession in the second quarter of 2017 and open in the third quarter of 2017. Gold's Gym is expected to take possession of their premises in the second quarter of 2017 and open in the first quarter of 2018.

Charlottetown Mall (RioCan ownership - 100%)

At RioCan's Charlottetown Mall in Charlottetown, Prince Edward Island, the former Target unit has been reconfigured to accommodate three large format tenants. RioCan has entered into lease agreements with H&M (19,000 sf.), Urban Planet (25,000 sf.) and SportChek (25,000 sf.).

Construction began in Q1 2016. H&M commenced operations in September 2016. Urban Planet has taken possession and is expected to open in February 2017. SportChek is expected to commence operations by the end of 2017.

About RioCan

RioCan is Canada's largest real estate investment trust with a total enterprise value of approximately $15 billion as at September 30, 2016. RioCan owns and manages Canada's largest portfolio of shopping centres with ownership interests in a portfolio of 301 Canadian retail and mixed use properties, including 15 properties under development, containing an aggregate net leasable area of 47 million square feet. For further information, please refer to RioCan's website at www.riocan.com.

Forward-Looking Information

This news release contains forward-looking statements within the meaning of applicable securities laws. These statements include, but are not limited to, statements made in this News Release (including the section entitled: "Property Level Highlights") the Trust's ability to lease space vacated by Target together with other statements concerning RioCan's objectives, its strategies to achieve those objectives, as well as statements with respect to management's beliefs, plans, estimates, and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Forward-looking statements generally can be identified by the use of forward-looking terminology such as "outlook", "objective", "may", "will", "would", "expect", "intend", "estimate", "anticipate", "believe", "should", "plan", "continue", or similar expressions suggesting future outcomes or events. Such forward-looking statements reflect management's current beliefs and are based on information currently available to management. All forward-looking statements in this News Release are qualified by these cautionary statements.

Forward-looking information is not a guarantee of future events or performance and, by its nature, is based on RioCan's current estimates and assumptions, which are subject to numerous risks and uncertainties, including those described under "Risks and Uncertainties" in RioCan's Management's Discussion and Analysis for the period ended September 30, 2016 ("MD&A") and the Trust's most recent Annual Report and Annual Information Form, which could cause actual events or results to differ materially from the forward-looking information contained in this News Release.

Management undertakes no obligation, except as required by applicable law, to publicly update or revise any forward- looking information, whether as a result of new information, future events or otherwise. Management undertakes no obligation, except as required by applicable law, to publicly update or revise any forward-looking information, whether as a result of new information, future events or otherwise.

Contact Information:
RioCan Real Estate Investment Trust
Edward Sonshine, O. Ont., Q.C.
Chief Executive Officer
(416) 866-3018
www.riocan.com

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